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Verizon's Q3 wireline story driven by consumer, business gains

Verizon's (NYSE: VZ) wireline segment may have faced a number of challenges as it wrapped up the third quarter, but that did not get in the way of the service provider reporting gains in its consumer and business segments.

The service provider reported Q3 wireline operating revenues of $10.1 billion, down 1.3 percent on a year-over-year basis from Q3 2010.

Access line loss: Following the ongoing industry trend every ILEC is seeing, Verizon reported that total voice connections, which consist of FiOS Digital Voice connections and traditional PSTN lines, declined 7.6 percent to 24.5 million. However, the service provider reported the smallest year-over-year decline since Q4 2006.

Broadband services: Broadband service continues to be strong performer in Verizon's wireline portfolio. At the end of the quarter, the service provider had 8.6 million total broadband connections, a 2.8 percent increase. Similar to other recent quarters, new FiOS Fiber to the Premises (FTTP)-based connections offset declines in DSL broadband connections. In total, Verizon added 20,000 broadband connections during the quarter.

Video services: Consumers continue to tune into FiOS TV. During the quarter, Verizon added 138,000 new FiOS Internet connections and 131,000 net new FiOS TV connections. At the end of the quarter, Verizon had a total of 4.6 million FiOS Internet and 4 million FiOS TV connections. After it gets through the FiOS installation backlogs caused by the storms and strike, Verizon said it will add about 200,000 FiOS Internet and 200,000 FiOS TV customers in Q4 2011.

McAdam

Business services: Buoyed by its growing suite of next-gen services, including its Terremark data center, cloud services and Ethernet, Verizon reported that global enterprise revenues rose 2.1 percent since Q3 2010 to $3.9 billion. Strategic service revenues were up 15.6 percent versus Q3 2010 and now represent about 50 percent of its global enterprise revenues. At the same time, Verizon's aggressive build out to service multinational corporations in international markets such as Asia Pacific, Europe and Latin America also paid off as the international business sales were up 9.8 percent year over year.

From an overall financial perspective, the service provider reported that revenue rose to $27.9 billion from $26.5 billion, beating analyst estimates of $27.88 billion.

Lowell McAdam, Verizon president and CEO, said the service provider was able to maintain its revenue targets despite a number of recent setbacks, including the impact of Hurricane Irene that came after a two-week labor strike of its wireline workforce,.

"Verizon emerges from the third quarter in a strong position to accelerate growth," he said in the earnings release. "We faced significant challenges in recent months, yet delivered results that keep us on track to meet our 2011 earnings and revenue guidance, with great momentum expected entering 2012."

Looking forward, Verizon maintained its previous 2011 outlook of earnings per share growth of 5 to 8 percent from $2.08 in 2010 and revenue growth of four to eight percent.